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Petrobras Loses to Samsung in Court Over DS-5 Drillship Case

Written by Paulo Nogueira

Published on 24/06/2020 at 07:48

Oil and Gas

Navio-sonda DS-5 da Pride Global – agora parte da Valaris.

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The U.S. District Court for Texas Dismissed a Damages Claim of US $ 250 Million Filed by Petrobras America Against South Korean Shipbuilder Samsung Heavy Industries (SHI).

Samsung Heavy said on Monday to the Stock Exchange that the damage claim was submitted in March 2019. That is, Petrobras America, an American entity of the Brazilian oil company Petrobras, sought compensation from Samsung Heavy, claiming it was forced to pay overcharged charter costs for the drillship DS-5 built by Samsung for the American company Pride Global – now part of Valaris.

In its claim, Petrobras stated that a broker for the construction of the drilling ship bribed employees of the Brazilian company with Samsung’s money, consequently increasing the charter rates that Petrobras had to pay.

The contract for the drilling ship between Samsung Heavy and Pride Global was signed in 2007, and the DS-5 was delivered in 2011. After delivery, Petrobras signed a five-year contract with Pride Global to use the drilling ship.

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Bribery Network Involving Petrobras and the Korean Shipowner

This is not the first time Samsung has faced a similar lawsuit, as it was involved in the bribery scandal of Lava Jato in Brazil.

In late 2019, SHI agreed to pay a fine of US $ 75 million as part of a settlement with the U.S. Department of Justice regarding a bribery investigation related to the construction of a drillship.

At that time, the DOJ stated that Samsung Heavy paid approximately US $ 20 million in commission payments to a Brazilian intermediary, knowing that part of that money would be used to bribe high-ranking Petrobras executives and secure a lucrative shipbuilding contract.

The bribes paid allowed Samsung to secure improper business advantages, as Petrobras entered into a charter contract with Pride, to whom Samsung Heavy sold the drillship for this contract.

The Korean company and the DOJ also reached a three-year deferred prosecution agreement. After successful completion, the DOJ would seek to dismiss a deferred charge related to the drillship DS-5.

Earlier this year, in a separate case, Valaris received a payment of US $ 200 million with the arbitration of SHI.

An arbitration tribunal awarded Valaris US $ 180 million in damages, along with the right to claim interest and costs, related to lawsuits the company filed against Samsung Heavy for losses incurred in connection with the DS-5 drilling services contract with Petrobras.

This payment was followed by a normalization of its business relationship with Petrobras and the end of Valaris’s dispute surrounding the drillship DS-5.

Ruling on Pacific Zonda

Late 2019 and early 2020 were certainly packed with dates for Samsung Heavy, as there was another arbitration in January.

In an unrelated Lava Jato case, SHI won an arbitration against Pacific Drilling related to the termination of a contract for constructing the Pacific Zonda drilling ship.

As a result, Pacific was ordered to pay US $ 320 million to Samsung.

Petrobras Loses to Samsung in Court Over DS-5 Drillship Case

The U.S. District Court for Texas Dismissed a Damages Claim of US $ 250 Million Filed by Petrobras America Against South Korean Shipbuilder Samsung Heavy Industries (SHI).

Bribery Network Involving Petrobras and the Korean Shipowner

Ruling on Pacific Zonda

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